You are analyzing the leverage of two firms and you note the following (all values in millions of dollars): Debt Firm A 498.8 Firm B 80.3 a. What is the market debt-to-equity ratio of each firm? b. What is the book debt-to-equity ratio of each firm? c. What is the interest coverage ratio of each firm? d. Which firm will have more difficulty meeting its debt obligations? Book Equity 303.1 36.6 a. What is the market debt-to-equity ratio of each firm? The market debt-to-equity ratio for Firm A is 1. (Round to two decimal places.) The market debt-to-equity ratio for Firm B is 1. (Round to two decimal places.) b. What is the book debt-to-equity ratio of each firm? The book debt-to-equity ratio for Firm A is 1. (Round to two decimal places.) The book debt-to-equity ratio for Firm B is 1. (Round to two decimal places.) c. What is the interest coverage ratio of each firm? The interest coverage ratio for Firm A is 1. (Round to two decimal places.) The interest coverage ratio for Firm B is 1. (Round to two decimal places.) d. Which firm will have more difficulty meeting its debt obligations? (Select from the drop-down menu.) Firm B will have more difficulty meeting its debt obligations. Market Equity 396.5 Operating Income Interest Expense 99.7 40.4 8.1 49.9 6.8
You are analyzing the leverage of two firms and you note the following (all values in millions of dollars): Debt Firm A 498.8 Firm B 80.3 a. What is the market debt-to-equity ratio of each firm? b. What is the book debt-to-equity ratio of each firm? c. What is the interest coverage ratio of each firm? d. Which firm will have more difficulty meeting its debt obligations? Book Equity 303.1 36.6 a. What is the market debt-to-equity ratio of each firm? The market debt-to-equity ratio for Firm A is 1. (Round to two decimal places.) The market debt-to-equity ratio for Firm B is 1. (Round to two decimal places.) b. What is the book debt-to-equity ratio of each firm? The book debt-to-equity ratio for Firm A is 1. (Round to two decimal places.) The book debt-to-equity ratio for Firm B is 1. (Round to two decimal places.) c. What is the interest coverage ratio of each firm? The interest coverage ratio for Firm A is 1. (Round to two decimal places.) The interest coverage ratio for Firm B is 1. (Round to two decimal places.) d. Which firm will have more difficulty meeting its debt obligations? (Select from the drop-down menu.) Firm B will have more difficulty meeting its debt obligations. Market Equity 396.5 Operating Income Interest Expense 99.7 40.4 8.1 49.9 6.8
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:You are analyzing the leverage of two firms and you note the following (all values in millions of dollars):
Debt
Firm A
498.8
Firm B
80.3
a. What is the market debt-to-equity ratio of each firm?
b. What is the book debt-to-equity ratio of each firm?
c. What is the interest coverage ratio of each firm?
d. Which firm will have more difficulty meeting its debt obligations?
Book Equity
303.1
36.6
a. What is the market debt-to-equity ratio of each firm?
The market debt-to-equity ratio for Firm A is 1. (Round to two decimal places.)
The market debt-to-equity ratio for Firm B is 1. (Round to two decimal places.)
b. What is the book debt-to-equity ratio of each firm?
The book debt-to-equity ratio for Firm A is 1. (Round to two decimal places.)
The book debt-to-equity ratio for Firm B is 1. (Round to two decimal places.)
c. What is the interest coverage ratio of each firm?
The interest coverage ratio for Firm A is 1. (Round to two decimal places.)
The interest coverage ratio for Firm B is 1. (Round to two decimal places.)
d. Which firm will have more difficulty meeting its debt obligations? (Select from the drop-down menu.)
Firm B will have more difficulty meeting its debt obligations.
Market Equity
396.5
Operating Income
99.7
Interest Expense
49.9
40.4
8.1
6.8
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